The Importance of Trade Promotion Versus Advertising in the Consumer Packaged Goods industry*

Abstract

This study investigates the effects of marketing expenditures on firm performance in the very active and competitive consumer packaged goods industry. Even though the marketing expenditures run into billions of dollars annually, the practices themselves are very debatable. Currently, empirical literature in this field is limited because direct data is not available to the public. This research advances the literature in important ways. Not only has it used the actual dollar value of marketing expenditures, but also it has divided the marketing spending into two categories, trade promotions as push strategy and advertising as pull strategy. This study also employs the quantile regression method, which is suitable in analyzing the heterogeneity in the consumer packaged goods industry. The results show that marketing expenditures, such as trade promotions and advertising, are positively related to net sales in the consumer packaged goods industry.